Caparol: Georgia the Global Leader in Building Paint Usage

The FINANCIAL -- Despite economic difficulties in the region Caparol Georgia managed to end 2015 with 15% growth. The company opened a new plant for producing dry mortars. The new plant of Caparol in turn stimulated the establishment of a new sand producing company in Georgia. Georgians have been named one of the leaders inthe consumption of building paints. The company names lack of usage of local raw materials and qualified staff in the construction business as key challenges.

“2015 has been an important year for us in several directions. Firstly, the company managed to reach over 15% growth on the South Caucasus market. This figure was quite successful against the background of the deteriorated economic conditions in Azerbaijan. Economic problems occurred also in Armenia. Overall, conditions were difficult in Russia and Turkey which had a negative impact on Georgia as well. In addition to our company’s growth, we luckily witnesseda boost in the construction business of Georgia,” Boris Gamrekeli, Director at Caparol Georgia, told The FINANCIAL.

Caparol’s concern, DAW, issued an additional volume of investment for constructing a new plant for producing dry mortars in 2015. “Dry mortars are used for thermal insulation systems and decorative plasters. We are mainly using Georgian raw materials in our production. It is important that such an enterprise becomes a locomotive for other productions. For example, we required washed, dried and separated sand for this production. There was no producer of such a product on the Georgian market before. So, the demand of our company stimulated the establishment of a new enterprise, which is now our supplier. In total, Caparol Georgia became a stimulator of the establishment of three small enterprises working with domestic raw materials. We are glad to encourage the usage and utilization of local mineral resources. Before that the whole share of this product was imported from Turkey. Now we have managed to partly replace import. Right now the share of local raw materials consists of over 25%. We do not consider the foundation of new enterprises in our business direction as competition. On the contrary - we appreciate it,” said Gamrekeli.

Q. From the second month of 2016 the Georgian Lari has shown to be strengthening against the USD which is more or less returning stability to businesses. What is your assessment of our neighbouring countries, have they moved to the post-crisis stage, or arethey still experiencing crisis conditions?

A.Since the recent crisis Azerbaijan started changing the main principles of its economic work. We are witnessing a change in the state’s approach towards the economy. They are changing the management style of customs houses, of the taxation system. All ofthese will definitely lead to positive changes. According to the positive feedbackthere is already stabilization occurring in Azerbaijan. We can say that the country is switching to the post-crisis level. From our company’s perspective I can say that we are waiting for more positive results this year.

As for Armenia, the country has been more stable in comparison with Azerbaijan. So, we expect it to reach better results in 2016 than we had in 2015.

Q. Caparol Georgia was established in 2005. Which year would you distinguish as the most successful and why?

A. The development of our company and its contribution to the whole country’s economy is one of the main measures of success for me. In this regard, I would distinguish 2008, when despite the tragic conditions that developed, Germans did not back-pedal and we managed to open our first factory in Tbilisi. It was the litmus of Germans’ trust in a better future of Georgia. Another successful year was 2015, when despite all geopolitical problems in the region, our concern allowed us to re-invest and we managed to open a new plant.

Q. Caparol is positioned on the Georgian market with two brands - Caparol and Alpina. How are sales divided between these two brands?

A. Caparol products are more for professional usage. It is comparatively expensive and its proper usage requires some knowledge and abilities and sometimes instruments. Under such conditions, it is natural that the share of Caparol in sales is dependent on consumer well-being and solvency. From year to year sales of Caparol are increasing in Georgia. Whereas previously we were producing only Alpina in Georgia, last year we started the production of three sorts of Caparol paints. It means that step-by-step consumers are becoming more oriented towards professional construction materials. Sales of Alpina are still dominating but we are glad to witness growing demand for Caparol.

Q. Which is the main segment of your customers - corporate or retail?

A. In line with our strategy and activity, the company had experienced a time when we were largely dependent on huge-scale projects. We realised that it could bring about a negative result and started diversifying our consumer segment. In accordance, several years ago we shifted to the retail segment. Of course it was challenging for us as the market hadalways had its traditions with main players. Competing with them was difficult. However, we managed to gain leadership in Georgian building paint materials. During the last three years not only our company, but the whole direction,has been witnessing the activity of private small and medium sized construction businesses.

Q. What is the share of your company out of Caparol’s global sales portfolio?

A. It is really interesting that the sales volume of paint materials in Georgia alone greatly exceeds the sales of Caparol in China. Caparol Georgia sells more paint per capita than Russia or Ukraine. It can be explained by our mentality. The top priorities of Georgians when receiving some income incorporate ‘supras’, a new car and apartment. Women are the main drivers of repair works. Moreover, statistically more colours of paint are purchased in Georgia than elsewhere in the world.

Q. Caparol is a symbol of colours. Which are the most popular colours in Georgia?

Caparol has hundreds of thousands of colours. In addition, with a special instrument we can create an individual colour of any configuration. We can create and fulfil a colour of any imagining and moreover, we offer the creation of a nominative colour.

It is hard to name the most popular colour in Georgia as they regularly change in line with the fashion and trends.

Q. What are your expectations for 2016?

A. We are quite optimistic about 2016. Competition is rising and we have always welcomed it. The establishment of new enterprises contributes to our economy. We are ready to accept this challenge.

Q. Besides a wide range of colours, what stands behind the Caparol brand?

A.Innovations are the key factor determining the success of Caparol for decades. Caparol was the first to introduce thermo insulation systems. It allows energy passive buildings to transform into energy effective ones. The slogan of the company is -I am Innovation. Inside the corporation we have an internal social network where employees share their innovative ideas. The platform generates new ideas, which are targeted to be a step ahead of existing demands and trends. Our concern, DAW, owns its research institute, RMI. It is widely used by our competitors as well. Our products are made of recycled materials, we use natural resources and this is just a small list of our innovative technologies.

Q. Do you see the importance of quality control of construction materials in Georgia?

A. I find it crucial. Any construction should be in line with some standard, whether European or U.S. or Chinese, in accordance with the builder’s stipulation. However, consumers should be aware of it. Stating one concrete standard and forcing everyone to follow it does not seem right to me.

Another important issue is literacy in professional fields. You can purchase a material of high quality but if it is improperly used it can become low-grade. Unfortunately, Georgia stopped educating residents in the construction field. As a result we have workers of low or half qualification. In this regard our company has published the book - Profession Painter - and distributed it free of charge. It was translated from the German education module. We also arrange seminars for builders and engineers.

Q. What are the main challenges for your company?

A. Getting more domestically-produced raw materials is one of the main challenges. Step-by-step we are managing to reduce the share of import but I wish to speed up this process. Another issue is finding qualified staff in this field.We manage to handle other different challenges which can be solved with the capacity of our company. The above-mentioned two issues are really beyond our controlthough and require the involvement of other institutions.